Examination of Witnesses (Questions 80-99)
OFCOM
2 MAY 2006
Q80 Rob Marris: I am also aware from
the Trade and Industry Committee visiting India in March that
in a market of 1.2 billion people and a larger geographic area
albeit with, I suspect, a lower density of mobile phone use, on
Airtel you can get a one rupee, which is about 1.3 pence, call
anywhere in India on any network. That is rather a lot less than,
say, a call from Italy: £2 up to £4.
Mr Carter: I am not defending
the intra-European current price tariff, what I am saying is it
is not solely a UK issue and, as a consequence, it is somewhere
between a difficult and an intractable regulatory problem for
us to solve without moving in concert with the rest of Europe,
which is one of the reasons why you have seen the Commission come
to this question because, by definition, you need some form of
bilateral, ideally multilateral approach to the problem.
Q81 Rob Marris: Why? If I am using
a UK mobile phone in France calling the UK, why do I need a multilateral
decision rather than, for example, Ofcom cracking down on my UK
mobile phone operator charging me what I personally regard as
overly high prices? Why does it need a pan-European approach?
That may be more desirable but why does it need one and why can
you not do anything now?
Mr Carter: Because of the way
the current framework directive works in market definitions it
would be difficult—not impossible, I take your point—for
us to unilaterally impose either a retail or wholesale regulatory
control on a UK operator. Having said that, we have a proposal
on the table from the Commission, which is being consulted on,
which has multilateral dimensions. In answer to your specific
question, what are we doing, we are doing two things. One, we
are participating at what you would describe as the highest level
of those discussions through our chairmanship of the ERG; secondly,
as a consequence of that we are doing quite a substantial amount
of the heavy lifting and the analysis as to what would a good
regulatory solution look like. I have to say, for the record,
we are not instinctively attracted to a retail price control,
not least because it is a lot easier to impose them than it is
to remove them, as retail price controls on fixed telephones would
verify; and our preference would be either for the industry to
deal with the disparity in price tariffs, which they are themselves,
and there are some signs of that; and/or secondly to have a sensible
workable wholesale piece of regulation which was passed through
to retail prices. We would not be happy just to have a wholesale
price solution where there is no benefit to the end consumer,
but we think you could achieve that without necessarily having
to go the whole hog to retail price controls.
Q82 Rob Marris: I would suggest to
you that that approach is a bit lily-livered. I have a Vodafone
and I have just gone on to Vodafone Passport. From memory, if
I am within the European Union and I am making a call it is 75
pence for the first minute. That does not suggest to me, given
the state of technology and the relative cheapness of technology
around the world compared with what it was 15 years ago, say,
that the industry is doing a very good job of driving down prices
through competition. If one accepts that—and you may not—that
suggests to me that Ofcom correspondingly is not doing a very
good job in stimulating the industry, either through retail price
control or through discussions in driving down the prices.
Mr Carter: I am not sure that
our positions are as far apart as the transcript of this discussion
might lead you to believe.
Q83 Rob Marris: I am glad to hear
it!
Mr Carter: We do not disagree
with your fundamental analysis that prices are too high; all we
are really debating is what is the most effective way of getting
them lower, and we are just making an observation at this stage
that imposing retail price controls is quite a heavy-handed solution.
I know we are not averse to doing it, we have done it in mobile
call termination, I am just saying that if we could find an alternative
which was a combination of a wholesale price control and an industry
solution which was more competitive than the one you have described,
because I will take your point that that would be a better outcome.
If that does not happen it will not really matter what we think
because the Commission will decide that there will be a retail
price control and unless that is vetoed at the Council of Ministers
then that will become the law.
Q84 Rob Marris: With respect it does
matter what you think because you have already said today that
you could in fact do it unilaterally although you would find that
harder to do.
Mr Carter: We could but now the
multilateral process is underway I think it makes sense for us
to work within that framework.
Q85 Rob Marris: Mobile phones and
international calls—and you are more of an expert than I
am—have been around for at least 10 years and probably longer;
how much longer is the consumer going to have to wait given, as
you have readily acknowledged in response to the Chairman, that
we are a service economy, we are a trading economy and the European
Union is a major trading partner? How much longer are we going
to have to put up with these costs to consumers and to UK business?
Mr Carter: I think probably less
than six to eight months.
Q86 Rob Marris: You think that the
European multilateral approach will produce a result within six
to eight months?
Mr Carter: I think that either
you will see a significant industry reaction or you will see a
European solution.
Q87 Rob Marris: How low do you think
prices might go?
Mr Carter: That is a little like
what level should the assistance programme go. I do not think
it would be appropriate for us to conjecture at this point as
to what is an appropriate price plan, but we take your point that
it needs to go down and we are making that very clear.
Q88 Rob Marris: I would have to disagree
with you, I am afraid; I think it would be important for you to
have some idea of how low the price should go because that should
inform your decision as to whether you push for some kind of RPC
or an industry-led competition. You cannot judge, surely, whether
the industry-led competition, if the multilateral talks go that
way, is producing an adequate outcome for the consumer unless
you have a yardstick by which to measure it, namely what could
happen if you did it by another regulatory method, namely RPC?
Mr Carter: And we are doing that
analysis right at this point in time.
Q89 Rob Marris: So you are in fact
going to form a view on how low prices should go; you just do
not have it yet to give to us today?
Mr Carter: Correct. We are working
with the Commission on their consultation at this point in time.
Chairman: My colleagues might have some
supplementary questions on this specific area of questioning.
Q90 Mr Bone: At the beginning of
that exchange I thought you said that there was an EU directive
stopping you doing this, but I just wanted to know whether that
is yes or no?
Mr Carter: No, if that is the
way it came across I apologise. What I said was the framework
directive, which is the legal framework for the way in which all
telecommunications regulations is conducted, makes for some complexities
in making unilateral decisions in markets where, in this instance,
the receiving party or the calling party is in a different geography.
The current proposal from the Commission is to come up with the
regulatory solution that exists outwith the framework directive,
so it will be a stand alone unilateral decision on the question
of international roaming prices. Part of the reason why the Commission
have reached for that solution is because they recognise that
the framework directive does not naturally lend itself to markets
that work in different geographies—that is the point I was
trying to make, clumsily.
Q91 Mr Bone: I think a lot of people
in this country think that making a telephone call from Europe
back home is a rip-off at the moment and some people would say
that you are showing some complacency on this matter and waiting
for the European Union to act when many people would look to you
to act quicker?
Lord Currie: I think they are
right to look to us but I think it is also right that this should
be an issue tackled at a European level. The interconnections
of networks and systems are such that a unilateral solution I
suspect would have unintended consequences that would cause difficulty.
A European-wide approach to this makes every sense and, as Stephen
has said, we are working very hard to bring such a solution about.
Q92 Mrs Curtis-Thomas: It does not
make much sense to me actually, given that there are already facilities,
such as the Vodaphone system, to reduce call charges, why we have
to wait and take a European lead on this. My question is, if I
wanted to know what the call charges are for each phone provider
at this specific time so that I can compare and contrast those
in order to get the best deals for myself where is the independent
advice containing that information available for me to access?
Mr Carter: I think that there
is only one single provider, uSwitch.
Q93 Mrs Curtis-Thomas: No, it does
not actually; it covers domestic telephone lines, it does not
cover mobile. I have looked, gentlemen, and I cannot find any
independent advice at all, which is why we may have only four
million users for 3G because I suspect quite a number of people
would like to go on to 3G but the cacophony of noise surrounding
rates, tariffs, incentives is so great I think it is substantially
confusing the marketplace and undermining the public's confidence.
So what are you going to do about that?
Mr Carter: I am not sure that
I would agree with your contention that there is a lack of consumer
confidence in the mobile market per se, but in answer to
your specific question about provision of independent data, that
is not something that we do, for a whole host of reasons not least
it would be almost undo-able because, as you have rightly observed,
the prices and the market change and the tariff structures change
on an almost daily basis. The reason why they do that is because
there are multiple providers and the reason why there are multiple
providers is because there are millions of people choosing these
new services on a daily basis. So, ironically, because it is such
a competitive market—we have five operators and seven virtual
operators—there are multiple choices. I accept the point
that that makes it a difficult market through which to navigate,
I do take that point, but I am not sure it is the case that there
is a lack of confidence in the market.
Q94 Mrs Curtis-Thomas: My colleague
has just said that people feel ripped-off by mobile phone providers
and I think they do and I think they have a right to feel that,
but when they try and navigate their way from where they are to
a preferred position the information presented to them is such
that they do not know when they are better off. There has been
an acknowledgment by other regulators that there should be some
clarity in the market, even though there may be market changes.
I grant that this is a challenging area but given the level of
usage and the current level of demand surely there must be an
incentive to provide some very clear information for the consumer?
I have checked uSwitch, I have checked all the other providers;
they manage to do it, they manage to give people a portfolio of
costs for their particular usage, so why not in mobile phones?
Mr Carter: I do not think it would
be appropriate for us to answer for every mobile provider what
they do or do not do.
Q95 Mrs Curtis-Thomas: Forgive me,
but is your job not to ensure that people like me do not get ripped-off?
Is that not your job? I am not just talking on behalf of myself.
Mr Carter: Is your rip-off observation
a general statement about mobile charges or specific to international
roaming? I thought the gentleman's previous comments were in relation
to international roaming charges?
Q96 Mrs Curtis-Thomas: Yes, in fact
specifically for international mobile charges.
Mr Carter: And we would agree
with that, which is why we are pursuing a solution on international
roaming as we speak.
Q97 Mrs Curtis-Thomas: Forgive me,
but if you look into my constituents I represent some of the poorest
people in the UK today and they do not have an option of a landline
they have an option of a mobile telephone, and I am trying to
ensure that they get the best deal possible for that particular
provider and at this time when I write to them I can say, "You
can go to these places to get a best deal, except in one of the
most important areas you cannot, you are stuck with whatever your
ability to rationalise the different prices will give you."
I think something needs to be done in this area; I think you have
a duty to do something in this area.
Mr Carter: Perhaps we should have
a specific conversation either separately or in writing about
what exactly it is you would like us to do and if we can do it
we will do it.
Q98 Mrs Curtis-Thomas: I would like
to see mobile telephony going on to uSwitch so that people can
do a comparative analysis on tariffs.
Mr Carter: uSwitch is a commercial
organisation and I am sure if you had that conversation with uSwitch
they would entertain that.
Lord Currie: Could we write to
you on this specific question because it is clearly an important
one?
Mrs Curtis-Thomas: Yes, you can.
Q99 Mr Evans: Who do you think is
to blame for the high international roaming charges?
Mr Carter: Who is to blame? I
am not sure that we are in a position to allocate blame. I think
that all operators in all countries are currently charging higher
prices because each of the geographies have different peculiarities—the
market structures are different. But it is undoubtedly the case—and
whilst I sense the ire around the table we do not disagree with
any of the points being made and we are dealing with them, I would
have to say at some speed—that for many millions of people,
including myself, I did not pay for this handset. We had a conversation
earlier about the price of set-top boxes where the gentleman there
was rightly saying that a free Sat box costs around £100.
A mobile phone handset costs considerably more than £100
but we get it for free and one of the ways in which I get it for
free is because there is a cost subsidy from call charges. So
there are structural issues in the market which are also relevant
issues to understand—they do not excuse the pricing—and
one of the things we are doing in the analysis of the market is
to work out where those cost subsidies exist, where they are legitimate
and where they are not, and then I am extremely confident that
by the end of this calendar year you will see some significant
reductions in those prices.
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